What types of customers/clients should be avoided and how do I recognize them?

You will get lots of advice on “bad customers”, “firing customers”, and the like. For the most part, in SaaS, I don’t agree.

Customers that pay you, and are engaged, and use your core product, are not just valuable — they also educate you. They teach you about the future. You need them. Especially, when they complain. Especially, when they consume a lot of your support and success and even engineering resources.

A feature-poor product with great customers will be very taxing on the product and support side. That’s a good thing. Don’t let whining and complaints from the internal peanut gallery push you not to invest in great opportunities today, and for the future.

But there are some that you clearly don’t want:

Free “customers”. These are not customers, folks. They give you bad advice. They take up way too much of your time. And they don’t represent what paying customers want. Avoid them.

Customers you cannot support. This is different from feature gaps, and from building something for one customer today that you hope 10 or 100 others will use. But a customer that truly will never be happy, that will leave you … you don’t want. A customer that churns is a customer you never had in a recurring revenue model. The line here between a customer dragging you into the future to build stuff you are behind on, and a customer you can’t support is fine, however.

The rest, I say, close them all. Hire someone new to support them, if they are a drain on the core. Or at least, don’t say No to them as an excuse not to work harder. That’s OK in B2C. You have to have everyone using basically a handful of the same features. It’s Not OK in B2B. Where you are building extensible workflows. There, the goal is to become more and more extensible over time.